-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Kf+nqwcQfI54M3I/iQrYntHoKOo88WR89vgVQDX/qtxyJhpYEDEVUPBC5GflXBVr AIRjoBXfIt47pxu2CKyv6Q== 0000940394-05-000606.txt : 20050510 0000940394-05-000606.hdr.sgml : 20050510 20050510164412 ACCESSION NUMBER: 0000940394-05-000606 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20050331 FILED AS OF DATE: 20050510 DATE AS OF CHANGE: 20050510 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BELAIR CAPITAL FUND LLC CENTRAL INDEX KEY: 0001050816 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 043404037 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-25767 FILM NUMBER: 05817372 BUSINESS ADDRESS: STREET 1: THE EATON VANCE BUILDING STREET 2: 255 STATE STREET CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: 6174828260 MAIL ADDRESS: STREET 1: THE EATON VANCE BUILDING STREET 2: 255 STATE STREET CITY: BOSTON STATE: MA ZIP: 02109 10-Q 1 belair10q.txt BELAIR CAPITAL FUND LLC FORM 10Q FOR 3-31-05 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 2005 [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from _________ to _____________ Commission File No. 000-25767 --------- Belair Capital Fund LLC ----------------------- (Exact name of registrant as specified in its charter) Massachusetts 04-3404037 ------------- ---------- (State of organization) (I.R.S. Employer Identification No.) The Eaton Vance Building 255 State Street Boston, Massachusetts 02109 --------------------- ----- (Address of principal executive offices) (Zip Code) Registrant's telephone number: 617-482-8260 ------------ None ---- (Former Name, Former Address and Former Fiscal Year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO --- --- Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). YES X NO --- --- BELAIR CAPITAL FUND LLC Index to Form 10-Q Page PART I FINANCIAL INFORMATION............................................ 1 Item 1. Financial Statements............................................. 1 Condensed Consolidated Statements of Assets and Liabilities as of March 31, 2005 (Unaudited) and December 31, 2004........... 3 Condensed Consolidated Statements of Operations (Unaudited) for the Three Months Ended March 31, 2005 and 2004............... 4 Condensed Consolidated Statements of Changes in Net Assets for the Three Months Ended March 31, 2005 (Unaudited) and the Year Ended December 31, 2004................................. 6 Condensed Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended March 31, 2005 and 2004............... 7 Financial Highlights (Unaudited) for the Three Months Ended March 31, 2005................................................... 9 Notes to Condensed Consolidated Financial Statements as of March 31, 2005 (Unaudited).......................................10 Item 2. Management's Discussion and Analysis of Financial Condition (MD&A) and Results of Operations.................................15 Item 3. Quantitative and Qualitative Disclosures About Market Risk.......18 Item 4. Controls and Procedures..........................................21 PART II OTHER INFORMATION................................................21 Item 1. Legal Proceedings................................................21 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds......21 Item 3. Defaults Upon Senior Securities..................................22 Item 4. Submission of Matters to a Vote of Security Holders..............22 Item 5. Other Information................................................22 Item 6. Exhibits.........................................................22 SIGNATURES...................................................................23 EXHIBIT INDEX................................................................24 PART I. FINANCIAL INFORMATION Item 1. Financial Statements. - -----------------------------------------------------------------------
BELAIR CAPITAL FUND LLC Condensed Consolidated Statements of Assets and Liabilities March 31, 2005 December 31, (Unaudited) 2004 ----------------------- ----------------------- Assets: Investment in Belvedere Capital Fund Company LLC (Belvedere Company) $ 1,566,049,935 $ 1,643,447,807 Investment in Partnership Preference Units 319,893,271 203,826,804 Investment in other real estate 178,104,922 339,580,435 Short-term investments 2,275,000 1,891,000 ----------------------- ----------------------- Total investments $ 2,066,323,128 $ 2,188,746,046 Cash 5,235,352 9,759,487 Escrow deposits - restricted - 80,839 Open interest rate swap agreements, at value 7,223,690 2,366,785 Distributions and interest receivable 1,177,934 126,778 Other assets 4,925,898 5,158,454 ----------------------- ----------------------- Total assets $ 2,084,886,002 $ 2,206,238,389 ----------------------- ----------------------- Liabilities: Loan payable - Credit Facility $ 494,000,000 $ 405,000,000 Mortgages payable 135,000,000 247,630,517 Payable for Fund Shares redeemed 7,453,385 19 Security deposits 425,078 820,256 Swap interest payable 116,582 148,252 Accrued expenses: Interest expense 798,746 1,545,503 Property taxes 482,805 833,918 Other expenses and liabilities 1,664,539 1,121,854 Minority interests in controlled subsidiaries 8,064,166 19,146,178 ----------------------- ----------------------- Total liabilities $ 648,005,301 $ 676,246,497 ----------------------- ----------------------- Net assets $ 1,436,880,701 $ 1,529,991,892 ----------------------- ----------------------- Shareholders' Capital $ 1,436,880,701 $ 1,529,991,892 ----------------------- ----------------------- Shares outstanding 11,748,931 12,058,622 ----------------------- ----------------------- Net asset value and redemption price per Share $ 122.30 $ 126.88 ----------------------- -----------------------
See notes to unaudited condensed consolidated financial statements 3 BELAIR CAPITAL FUND LLC Condensed Consolidated Statements of Operations (Unaudited)
Three Months Three Months Ended Ended March 31, March 31, 2005 2004 ------------------------------------ Investment Income: Dividends allocated from Belvedere Company (net of foreign taxes of $62,722 and $66,409, respectively) $ 6,535,978 $ 5,557,427 Interest allocated from Belvedere Company 48,207 26,538 Expenses allocated from Belvedere Company (2,381,197) (2,410,134) ------------------------------------ Net investment income allocated from Belvedere Company $ 4,202,988 $ 3,173,831 Rental income 6,593,735 5,511,218 Distributions from Partnership Preference Units 5,305,293 8,470,877 Interest 111,933 105,148 ------------------------------------ Total investment income $ 16,213,949 $ 17,261,074 ------------------------------------ Expenses: Investment advisory and administrative fees $ 1,404,095 $ 1,401,115 Property management fees 187,717 218,537 Servicing fees 137,005 167,543 Interest expense on mortgages 2,770,605 2,386,111 Interest expense on Credit Facility 3,267,900 1,670,880 Property and maintenance expenses 1,094,130 1,576,526 Property taxes and insurance 942,293 700,781 Miscellaneous 516,663 136,386 ------------------------------------ Total expenses $ 10,320,408 $ 8,257,879 ------------------------------------ Net investment income before minority interests in net income of controlled subsidiaries $ 5,893,541 $ 9,003,195 Minority interests in net income of controlled subsidiaries (259,420) (110,236) ------------------------------------ Net investment income $ 5,634,121 $ 8,892,959 ------------------------------------
See notes to unaudited condensed consolidated financial statements 4 BELAIR CAPITAL FUND LLC Condensed Consolidated Statements of Operations (Unaudited) (Continued)
Three Months Three Months Ended Ended March 31, March 31, 2005 2004 ------------------ ------------------ Realized and Unrealized Gain (Loss) Net realized gain (loss) - Investment transactions, securities sold short and foreign currency transactions allocated from Belvedere Company (identified cost basis) $ (1,353,089) $ 5,850,913 Investment transactions in Partnership Preference Units (identified cost basis) (3,679) 2,399,543 Investment transactions in other real estate (net of minority interest in realized loss of controlled subsidiaries of $(3,550,665) and $0, respectively) 2,326,193 - Interest rate swap agreements (1) (1,761,821) (3,051,795) ------------------ ------------------ Net realized (loss) gain $ (792,396) $ 5,198,661 ------------------ ------------------ Change in unrealized appreciation (depreciation) Investments, securities sold short and foreign currency allocated from Belvedere Company (identified cost basis) $ (36,552,996) $ 24,013,775 Investment in Partnership Preference Units (identified cost basis) 628,755 (6,958,051) Investment in other real estate (net of minority interest in unrealized appreciation of controlled subsidiaries of $3,402,756 and $1,908,131, respectively) 225,324 (1,958,342) Interest rate swap agreements 4,856,905 (4,873,854) ------------------ ------------------ Net change in unrealized appreciation (depreciation) $ (30,842,012) $ 10,223,528 ------------------ ------------------ Net realized and unrealized (loss) gain $ (31,634,408) $ 15,422,189 ------------------ ------------------ Net (decrease) increase in net assets from operations $ (26,000,287) $ 24,315,148 ================== ==================
(1) Amounts represent periodic payments made in connection with interest rate swap agreements (Note 4). See notes to unaudited condensed consolidated financial statements 5 BELAIR CAPITAL FUND LLC Condensed Consolidated Statements of Changes in Net Assets
Three Months Ended March 31, 2005 Year Ended (Unaudited) December 31, 2004 ---------------------- ---------------------- Increase (Decrease) in Net Assets: Net investment income $ 5,634,121 $ 31,237,747 Net realized (loss) gain from investment transactions, securities sold short, foreign currency transactions and interest rate swap agreements (792,396) 30,327,282 Net change in unrealized appreciation (depreciation) of investments, securities sold short, foreign currency and interest rate swap agreements (30,842,012) 44,982,446 ---------------------- ---------------------- Net (decrease) increase in net assets from operations $ (26,000,287) $ 106,547,475 ---------------------- ---------------------- Transactions in Fund Shares - Net asset value of Fund Shares issued to Shareholders in payment of distributions declared $ 12,687,778 $ 7,259,756 Net asset value of Fund Shares redeemed (51,147,765) (89,817,709) ---------------------- ---------------------- Net decrease in net assets from Fund Share transactions $ (38,459,987) $ (82,557,953) ---------------------- --------------------- Distributions - Distributions to Shareholders $ (28,650,917) $ (16,279,479) ---------------------- ---------------------- Total distributions $ (28,650,917) $ (16,279,479) ---------------------- ---------------------- Net (decrease) increase in net assets $ (93,111,191) $ 7,710,043 Net assets: At beginning of period $ 1,529,991,892 $ 1,522,281,849 ---------------------- --------------------- At end of period $ 1,436,880,701 $ 1,529,991,892 ====================== ======================
See notes to unaudited condensed consolidated financial statements 6 BELAIR CAPITAL FUND LLC Condensed Consolidated Statements of Cash Flows (Unaudited)
Three Months Three Months Ended Ended March 31, March 31, 2005 2004 ------------------- ------------------ Cash Flows From (For) Operating Activities - Net (decrease) increase in net assets from operations $ (26,000,287) $ 24,315,148 Adjustments to reconcile net (decrease) increase in net assets from operations to net cash flows for operating activities - Net investment income allocated from Belvedere Company (4,202,988) (3,173,831) Increase in interest receivable from other real estate investments (46,105) (43,174) (Increase) decrease in other assets (993,630) 88,779 Increase in distributions and interest receivable (1,051,156) (558,276) (Decrease) increase in interest payable for open swap agreements (31,670) 2,289 Increase in security deposits, accrued interest and accrued other expenses and liabilities 778,063 39,983 Increase in accrued property taxes 146,309 214,891 Purchases of Partnership Preference Units (115,848,417) (48,668,050) Proceeds from sale of investment in other real estate 42,877,294 - Proceeds from sales of Partnership Preference Units 407,026 50,715,342 Improvements to rental property (534,855) (328,563) Decrease in cash due to sale of majority interest in controlled subsidiary (2,199,688) - Interest incurred on interest rate swap agreements (1,761,821) (3,051,795) Increase in minority interest 240,000 - Increase in short-term investments (384,000) (16,694,670) Minority interests in net income of controlled subsidiaries 259,420 110,236 Net realized loss (gain) from investment transactions, securities sold short, foreign currency transactions and interest rate swap agreements 792,396 (5,198,661) Net change in unrealized (appreciation) depreciation of investments, securities sold short, foreign currency and interest rate swap agreements 30,842,012 (10,223,528) ------------------- ------------------ Net cash flows for operating activities $ (76,712,097) $ (12,453,880) ------------------- ------------------ Cash Flows From (For) Financing Activities - Proceeds from Credit Facility $ 89,000,000 $ 63,000,000 Repayment of Credit Facility - (42,000,000) Payments for Fund Shares redeemed (1,373) (1,758) Distributions paid to Shareholders (15,963,139) (9,019,723) Distributions paid to minority shareholders (847,526) (16,800) ------------------- ------------------ Net cash flows from financing activities $ 72,187,962 $ 11,961,719 ------------------- ------------------ Net decrease in cash $ (4,524,135) $ (492,161) Cash at beginning of period $ 9,759,487 $ 8,687,577 ------------------- ------------------ Cash at end of period $ 5,235,352 $ 8,195,416 =================== ==================
See notes to unaudited condensed consolidated financial statements 7 BELAIR CAPITAL FUND LLC Condensed Consolidated Statements of Cash Flows (Unaudited) (Continued)
Three Months Three Months Ended Ended March 31, March 31, 2005 2004 ------------------- ------------------ Supplemental Disclosure and Non-cash Investing and Financing Activities - Interest paid on loan - Credit Facility $ 3,325,463 $ 1,627,008 Interest paid on mortgages $ 2,695,468 $ 2,345,531 Interest paid on swap agreements $ 1,793,491 $ 3,049,506 Market value of securities distributed in payment of redemptions $ 43,694,775 $ 17,136,551 Market value of real property and other assets, net of current liabilities, disposed of in conjunction with sale of other real estate $ 163,004,330 $ - Market value of minority interest disposed of in conjunction with sale of other real estate $ 10,585,993 $ - Mortgage disposed of in conjunction with sale of other real estate $ 112,630,517 $ - See notes to unaudited condensed consolidated financial statements
8 BELAIR CAPITAL FUND LLC as of March 31, 2005 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Financial Highlights (Unaudited) For the Three Months Ended March 31, 2005
- ------------------------------------------------------------------------------------------------------------------------------------ Net asset value - Beginning of period $ 126.880 - ------------------------------------------------------------------------------------------------------------------------------------ Income (loss) from operations - ------------------------------------------------------------------------------------------------------------------------------------ Net investment income (1) $ 0.471 Net realized and unrealized loss (2.671) - ------------------------------------------------------------------------------------------------------------------------------------ Total loss from operations $ (2.200) - ------------------------------------------------------------------------------------------------------------------------------------ Distributions - ------------------------------------------------------------------------------------------------------------------------------------ Distributions to Shareholders $ (2.380) - ------------------------------------------------------------------------------------------------------------------------------------ Total distributions $ (2.380) - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value - End of period $ 122.300 - ------------------------------------------------------------------------------------------------------------------------------------ Total Return (2) (1.71%) - ------------------------------------------------------------------------------------------------------------------------------------ As a Percentage As a Percentage of Average Net of Average Gross Ratios Assets (3) Assets (3)(8) - ----------------------------------------------------------------------------------------------------------------------------------- Expenses of Consolidated Real Property Subsidiaries Interest and other borrowing costs (4) 0.62% (9) 0.44% (9) Operating expenses (4) 0.54% (9) 0.38% (9) Belair Capital Fund LLC Expenses Interest and other borrowing costs (5)(6) 0.89% (9) 0.63% (9) Investment advisory and administrative fees, servicing fees and other Fund operating expenses (5)(7) 1.16% (9) 0.82% (9) - ----------------------------------------------------------------------------------------------------------------------------------- Total expenses 3.21% (9) 2.27% (9) Net investment income 1.54% (9) 1.09% (9) - ------------------------------------------------------------------------------------------------------------------------------------ Supplemental Data - ------------------------------------------------------------------------------------------------------------------------------------ Net assets, end of period (000's omitted) $ 1,436,881 Portfolio turnover of Tax-Managed Growth Portfolio (the Portfolio) 0.12% - -----------------------------------------------------------------------------------------------------------------------------------
(1) Calculated using average shares outstanding. (2) Returns are calculated by determining the percentage change in net asset value with all distributions reinvested. Total return is not computed on an annualized basis. (3) For the purpose of calculating ratios, the income and expenses of Belair Real Estate Corporation's (Belair Real Estate) controlled subsidiaries are reduced by the proportionate interests therein of investors other than Belair Real Estate. (4) Includes Belair Real Estate's proportional share of expenses incurred by its controlled subsidiaries. (5) Includes the expenses of Belair Capital Fund LLC (Belair Capital) and Belair Real Estate. Does not include expenses of Belair Real Estate's controlled subsidiaries. (6) Ratios do not include interest incurred in connection with interest rate swap agreements. Had such amounts been included, ratios would be higher. (7) Includes Belair Capital's share of Belvedere Capital Fund Company LLC's (Belvedere Company) allocated expenses, including those expenses allocated from the Portfolio. (8) Average Gross Assets is defined as the average daily amount of all assets of Belair Capital (not including its investment in Belair Real Estate) plus all assets of Belair Real Estate minus the sum of their liabilities other than the principal amount of money borrowed. For this purpose, the assets of Belair Real Estate's controlled subsidiaries are reduced by the proportionate interests therein of investors other than Belair Real Estate. (9) Annualized. See notes to unaudited condensed consolidated financial statements 9 BELAIR CAPITAL FUND LLC as of March 31, 2005 Notes To Condensed Consolidated Financial Statements (Unaudited) 1 Basis of Presentation The condensed consolidated interim financial statements of Belair Capital Fund LLC (Belair Capital) and its subsidiaries (collectively, the Fund) have been prepared by the Fund, without audit, in accordance with accounting principles generally accepted in the United States of America for interm financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted as permitted by such rules and regulations. All adjustments, consisting of normal recurring adjustments, have been included. Management believes that the disclosures are adequate to present fairly the financial position, results of operations, cash flows and financial highlights at the dates and for the periods presented. It is suggested that these interim financial statements be read in conjunction with the financial statements and the notes thereto included in the Fund's latest annual report on Form 10-K. Results for interim periods are not necessarily indicative of those to be expected for the full fiscal year. The balance sheet at December 31, 2004 and the statement of changes in net assets for the year then ended have been derived from the December 31, 2004 audited financial statements but do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements as permitted by the instructions to Form 10-Q and Article 10 of Regulation S-X. 2 Investment Transactions The following table summarizes the Fund's investment transactions, other than short-term obligations, for the three months ended March 31, 2005 and March 31, 2004:
Three Months Ended Three Months Ended Investment Transaction March 31, 2005 March 31, 2004 - ----------------------------------------------------------------------------------------------------------- Decreases in investment in Belvedere Capital Fund Company LLC (Belvedere Company) $ 43,694,775 $ 17,136,551 Sale of other real property (1) $ 42,877,294 $ - Purchases of Partnership Preference Units (2) $ 115,848,417 $ 48,668,050 Sales of Partnership Preference Units (3) $ 407,026 $ 50,715,342 ---------------------------------------------------------------------------------------------------------
(1) During the three months ended March 31, 2005, Belair Real Estate sold its majority interest in Bel Residential Properties Trust (Bel Residential) to another fund advised by Boston Management and Research (Boston Management) recognizing a gain of $2,326,193. (2) Purchases of Partnership Preference Units during the three months ended March 31, 2005 and March 31, 2004 represent Partnership Preference Units purchased from other investment funds advised by Boston Management. (3) Sales of Partnership Preference Units for the three months ended March 31, 2005 and 2004 include Partnership Preference Units sold to other investment funds advised by Boston Management for which a loss of $3,679 and $997,698 was recognized, respectively. 10 3 Indirect Investment in the Portfolio The following table summarizes the Fund's investment in Tax-Managed Growth Portfolio (the Portfolio) through Belvedere Company for the three months ended March 31, 2005 and March 31, 2004, including allocations of income, expenses and net realized and unrealized gains (losses) for the respective periods then ended:
Three Months Ended Three Months Ended March 31, 2005 March 31, 2004 - ------------------------------------------------------------------------------------------------------------------------- Belvedere Company's interest in the Portfolio (1) $ 12,584,989,585 $ 11,520,846,141 The Fund's investment in Belvedere Company (2) $ 1,566,049,935 $ 1,604,097,252 Income allocated to Belvedere Company from the Portfolio $ 52,138,985 $ 39,365,471 Income allocated to the Fund from Belvedere Company $ 6,584,185 $ 5,583,965 Expenses allocated to Belvedere Company from the Portfolio $ 14,031,081 $ 12,634,511 Expenses allocated to the Fund from Belvedere Company $ 2,381,197 2,410,134 Net realized (loss) gain from investment transactions, securities sold short and foreign currency transactions allocated to Belvedere Company from the Portfolio $ (7,321,051) $ 41,048,575 Net realized (loss) gain from investment transactions, securities sold short and foreign currency transactions allocated to the Fund from Belvedere Company $ (1,353,089) $ 5,850,913 Net change in unrealized appreciation (depreciation) of investments, securities sold short and foreign currency allocated to Belvedere Company from the Portfolio $ (280,637,975) $ 163,577,445 Net change in unrealized appreciation (depreciation) of investments, securities sold short and foreign currency allocated to the Fund from Belvedere Company $ (36,552,996) $ 24,013,775 - -------------------------------------------------------------------------------------------------------------------------
(1) As of March 31, 2005 and 2004, the value of Belvedere Company's interest in the Portfolio represents 67.7% and 63.9% of the Portfolio's net assets, respectively. 2) As of March 31, 2005 and 2004, the Fund's investment in Belvedere Company represents 12.4% and 13.9% of Belvedere Company's net assets, respectively. A summary of the Portfolio's Statement of Assets and Liabilities at March 31, 2005, December 31, 2004 and March 31, 2004 and its operations for the three months ended March 31, 2005, for the year ended December 31, 2004 and for the three months ended March 31, 2004 follows:
March 31, December 31, March 31, 2005 2004 2004 --------------------------------------------------------------- Investments, at value $18,468,165,880 $19,139,242,713 $18,003,359,532 Other assets 119,669,991 199,253,595 25,944,066 - ----------------------------------------------------------------------------------------------------------------- Total assets $18,587,835,871 $19,338,496,308 $18,029,303,598 - ----------------------------------------------------------------------------------------------------------------- Loan payable - Line of Credit $ 4,200,000 $ - $ - Securities sold short, at value - 197,010,000 - Other liabilities 125,209 343,906 254,697 - ----------------------------------------------------------------------------------------------------------------- Total liabilities $ 4,325,209 $ 197,353,906 $ 254,697 - ----------------------------------------------------------------------------------------------------------------- Net assets $18,583,510,662 $19,141,142,402 $18,029,048,901 ================================================================================================================= 11 Dividends and Interest $ 77,449,217 $ 292,265,206 $ 62,101,320 - ----------------------------------------------------------------------------------------------------------------- Investment advisor fee $ 20,297,088 $ 77,609,178 $ 19,348,796 Other expenses 611,649 2,649,363 598,921 Total expense reductions (59,259) (26,706) - - ----------------------------------------------------------------------------------------------------------------- Net expenses $ 20,849,478 $ 80,231,835 $ 19,947,717 - ----------------------------------------------------------------------------------------------------------------- Net investment income $ 56,599,739 $ 212,033,371 $ 42,153,603 Net realized (loss) gain from investment transactions, securities sold short and foreign currency transactions (11,056,277) 152,422,840 64,894,806 Net change in unrealized appreciation (depreciation) of investments, securities sold short and foreign currency (422,252,722) 1,317,878,707 261,922,214 - ----------------------------------------------------------------------------------------------------------------- Net (decrease) increase in net assets from operations $ (376,709,260) $ 1,682,334,918 $ 368,970,623 - -----------------------------------------------------------------------------------------------------------------
4 Interest Rate Swap Agreements Belair Capital has entered into interest rate swap agreements with Merrill Lynch Capital Services, Inc. in connection with its real estate investments and the associated borrowings. Under such agreements, Belair Capital has agreed to make periodic payments at fixed rates in exchange for payments at floating rates. The notional or contractual amounts of these instruments may not necessarily represent the amounts potentially subject to risk. The measurement of the risks associated with these investments is meaningful only when considered in conjunction with all related assets, liabilities and agreements. Interest rate swap agreements open at March 31, 2005 and December 31, 2004 are listed below.
Notional Initial Amount Optional Final Unrealized Unrealized Effective (000's Fixed Floating Termination Termination Appreciation at Appreciation at Date omitted) Rate Rate Date Date March 31, 2005 December 31, 2004 - ---------------------------------------------------------------------------------------------------------------------- 10/03 $ 20,000 4.045% LIBOR + 0.30% - 6/10 $ 753,791 $ 265,191 10/03 61,500 4.865% LIBOR + 0.30% 07/04 6/10 943,865 278,866 10/03 75,000 4.795% LIBOR + 0.30% 09/04 6/10 1,306,762 450,060 10/03 42,000 4.69% LIBOR + 0.30% 02/05 6/10 868,739 354,457 10/03 49,000 4.665% LIBOR + 0.30% 03/05 6/10 1,052,763 442,140 10/03 35,330 4.18% LIBOR + 0.30% 07/09 6/10 1,185,806 362,399 02/04 95,952 5.00% LIBOR + 0.30% 08/04 6/10 1,111,964 213,672 - ---------------------------------------------------------------------------------------------------------------------- Total $378,782 $ 7,223,690 $2,366,785 - ----------------------------------------------------------------------------------------------------------------------
5 Debt A Credit Facility -- On February 17, 2005, Belair Capital amended its credit agreement with DrKW Holdings, Inc. to establish a borrowing limit of $450,000,000 under that agreement. Belair Capital used the proceeds from these borrowings to finance the Fund's investment in Partnership Preference Units. Borrowings under this credit arrangement accrue interest at a rate of one-month LIBOR plus 0.30% per annum. As of March 31, 2005, outstanding borrowings under this credit arrangement totaled $450,000,000. There were no changes to the terms of Belair Capital's credit agreement with Merrill Lynch Mortgage Capital, Inc. during the quarter ended March 31, 2005. As of March 31, 2005, outstanding borrowings under this credit arrangement totaled $44,000,000. B Mortgages -- In February 2005, in conjunction with the sale of Belair Real Estate's majority interest in Bel Residential (Note 2), the mortgage payable by Bel Residential was disposed of. At the time of the transaction, the loan balance was $112,630,517. 12 6 Segment Information Belair Capital pursues its investment objective primarily by investing indirectly in the Portfolio through Belvedere Company. The Portfolio is a diversified investment company that emphasizes investments in common stocks of domestic and foreign growth companies that are considered by its investment adviser to be high in quality and attractive in their long-term investment prospects. Separate from its investment in Belvedere Company, Belair Capital invests in real estate assets through its subsidiary, Belair Real Estate. Belair Real Estate invests directly and indirectly in Partnership Preference Units, debt and equity investments in private real estate companies and in real property through controlled subsidiaries, Bel Residential and Elkhorn Property Trust (for the period during which Belair Real Estate maintained an interest in each of the controlled subsidiaries). Belair Capital evaluates performance of the reportable segments based on the net increase (decrease) in net assets from operations of the respective segment, which includes net investment income (loss), net realized gain (loss) and unrealized appreciation (depreciation). The accounting policies of the reportable segments are the same as those for Belair Capital on a consolidated basis. No reportable segments have been aggregated. Reportable information by segment is as follows:
For the Three Months Ended Tax-Managed Real March 31, 2005 Growth Portfolio* Estate Total - --------------------------------------------------------------------------------------------------------------------- Revenue $ 4,202,988 $ 11,974,434 $ 16,177,422 Interest expense on mortgages - (2,770,605) (2,770,605) Interest expense on Credit Facility - (3,039,147) (3,039,147) Operating expenses (687,803) (3,354,884) (4,042,687) Minority interest in net income of controlled subsidiaries - (259,420) (259,420) - --------------------------------------------------------------------------------------------------------------------- Net investment income $ 3,515,185 $ 2,550,378 $ 6,065,563 Net realized (loss) gain (1,353,089) 560,693 (792,396) Net change in unrealized appreciation (depreciation) (36,552,996) 5,710,984 (30,842,012) - --------------------------------------------------------------------------------------------------------------------- Net (decrease) increase in net assets from operations of reportable segments $(34,390,900) $ 8,822,055 $(25,568,845) - --------------------------------------------------------------------------------------------------------------------- For the Three Months Ended Tax-Managed Real March 31, 2004 Growth Portfolio* Estate Total - --------------------------------------------------------------------------------------------------------------------- Revenue $ 3,173,831 $ 14,034,549 $ 17,208,380 Interest expense on mortgage - (2,386,111) (2,386,111) Interest expense on Credit Facility - (1,570,627) (1,570,627) Operating expenses (699,664) (3,275,833) (3,975,497) Minority interest in net income of controlled subsidiary - (110,236) (110,236) - --------------------------------------------------------------------------------------------------------------------- Net investment income $ 2,474,167 $ 6,691,742 $ 9,165,909 Net realized gain (loss) 5,850,913 (652,252) 5,198,661 Net change in unrealized appreciation (depreciation) 24,013,775 (13,790,247) 10,223,528 - --------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets from operations of reportable segments $ 32,338,855 $ (7,750,757) $ 24,588,098 - --------------------------------------------------------------------------------------------------------------------- 13 Tax-Managed Growth Real At March 31, 2005 Portfolio* Estate Total - --------------------------------------------------------------------------------------------------------------------- Segment assets $1,566,049,935 $513,356,224 $2,079,406,159 Segment liabilities 7,453,385 603,510,123 610,963,508 - --------------------------------------------------------------------------------------------------------------------- Net assets (liabilities) of reportable segments $1,558,596,550 $(90,153,899) $1,468,442,651 - --------------------------------------------------------------------------------------------------------------------- At December 31, 2004 - --------------------------------------------------------------------------------------------------------------------- Segment assets $1,643,447,807 $ 557,178,367 $2,200,626,174 Segment liabilities 19 655,203,581 655,203,600 - --------------------------------------------------------------------------------------------------------------------- Net assets (liabilities) of reportable segments $1,643,447,788 $ (98,025,214) $1,545,422,574 - ---------------------------------------------------------------------------------------------------------------------
* Belair Capital invests indirectly in Tax-Managed Growth Portfolio through Belvedere Company. The following tables reconcile the reported segment information to the condensed consolidated financial statements for the periods indicated:
Three Months Ended Three Months Ended March 31, 2005 March 31, 2004 ---------------------- ----------------------- Revenue: Revenue from reportable segments $ 16,177,422 $ 17,208,380 Unallocated amounts: Interest earned on cash not invested in the Portfolio or in subsidiaries 36,527 52,694 ---------------------- ----------------------- Total revenue $ 16,213,949 $ 17,261,074 ---------------------- ----------------------- Net increase (decrease) in net assets from operations: Net (decrease) increase in net assets from operations of reportable segments $ (25,568,845) $ 24,588,098 Unallocated investment income: Interest earned on cash not invested in the Portfolio or in subsidiaries 36,527 52,694 Unallocated expenses (1): Servicing fees (137,005) (167,543) Interest expense on Credit Facility (228,753) (100,253) Audit, tax and legal fees (89,604) (45,101) Other operating expenses (12,607) (12,747) ---------------------- ----------------------- Total net (decrease) increase in net assets from operations $ (26,000,287) $ 24,315,148 ---------------------- -----------------------
(1) Unallocated expenses represent costs incurred that pertain to the overall operation of Belair Capital, and do not pertain to either operating segment.
March 31, 2005 December 31, 2004 -------------------- --- ---------------------- Net assets: Net assets of reportable segments $1,468,442,651 $ 1,545,422,574 Unallocated amounts: Cash (1) 3,204,843 3,721,215 Short-term investments (1) 2,275,000 1,891,000 Loan payable - Credit Facility (2) (36,865,429) (20,836,553) Other liabilities (176,364) (206,344) -------------------- --- ---------------------- Total net assets $ 1,436,880,701 $1,529,991,892 -------------------- --- ----------------------
(1) Unallocated cash and short-term investments represent cash and cash equivalents not invested in the Portfolio or real estate assets. (2) Unallocated amount of loan payable - Credit Facility represents borrowings not specifically used to fund real estate investments. Such borrowings are generally used to pay selling commissions, organization expenses and other liquidity needs of the Fund. 14 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION (MD&A) AND RESULTS OF OPERATIONS. The information in this report contains forward-looking statements within the meaning of the federal securities laws. Forward-looking statements typically are identified by use of terms such as "may," "will," "should," "might," "expect," "anticipate," "estimate," and similar words, although some forward-looking statements are expressed differently. The actual results of Belair Capital Fund LLC (the Fund) could differ materially from those contained in the forward-looking statements due to a number of factors. The Fund undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by applicable law. Factors that could affect the Fund's performance include a decline in the U.S. stock markets or in general economic conditions, adverse developments affecting the real estate industry, or fluctuations in interest rates. The following discussion should be read in conjunction with the Fund's unaudited condensed consolidated financial statements and related notes in Item 1 above. (a) RESULTS OF OPERATIONS. Increases and decreases in the Fund's net asset value per share are based on net investment income (or loss) and realized and unrealized gains and losses on investments. The Fund's net investment income (or loss) is determined by subtracting the Fund's total expenses from its investment income and then deducting the net investment income (or loss) attributable to the minority interest in controlled subsidiaries of Belair Real Estate Corporation (Belair Real Estate). The Fund's investment income includes the net investment income allocated to the Fund from Belvedere Capital Fund Company LLC (Belvedere Company), rental income from the properties owned by Belair Real Estate's controlled subsidiaries, partnership income allocated to the income-producing preferred equity interests in real estate operating partnerships (Partnership Preference Units) owned directly or indirectly by Belair Real Estate and interest earned on the Fund's short-term investments (if any). The net investment income of Belvedere Company allocated to the Fund includes dividends and interest allocated to Belvedere Company by Tax-Managed Growth Portfolio (the Portfolio) less the expenses of Belvedere Company allocated to the Fund. The Fund's total expenses include the Fund's investment advisory and administrative fees, servicing fees, interest expense from mortgages on properties owned by Belair Real Estate's controlled subsidiaries, interest expense on the Fund's Credit Facility (described in Item 2(b) below), property management fees, property taxes, insurance, maintenance and other expenses relating to the properties owned by Belair Real Estate's controlled subsidiaries, and other miscellaneous expenses. The Fund's realized and unrealized gains and losses are the result of transactions in, or changes in value of, security investments held through the Fund's indirect interest (through Belvedere Company) in the Portfolio, real estate investments held through Belair Real Estate, the Fund's interest rate swap agreements and any other direct investments of the Fund, as well as periodic payments made by the Fund pursuant to interest rate swap agreements. Realized and unrealized gains and losses on investments have the most significant impact on the Fund's net asset value per share and result primarily from sales of such investments and changes in their underlying value. The investments of the Portfolio consist primarily of common stocks of domestic and foreign growth companies that are considered by its investment adviser to be high in quality and attractive in their long-term investment prospects. Because the securities holdings of the Portfolio are broadly diversified, the performance of the Portfolio cannot be attributed to one particular stock or one particular industry or market sector. The performance of the Portfolio and the Fund are substantially influenced by the overall performance of the U.S. stock market, as well as by the relative performance versus the overall market of specific stocks and classes of stocks in which the Portfolio maintains large positions. MD&A AND RESULTS OF OPERATIONS FOR THE QUARTER ENDED MARCH 31, 2005 COMPARED TO THE QUARTER ENDED MARCH 31, 2004 PERFORMANCE OF THE FUND.(1) The Fund's investment objective is to achieve long-term, after-tax returns for Shareholders. Eaton Vance Management (Eaton Vance), as the Fund's manager, measures the Fund's success in achieving its objective based on the investment returns of the Fund, using the S&P 500 Index as the Fund's primary performance benchmark. The S&P 500 Index is a broad-based unmanaged index of common stocks widely used as a measure of U.S. stock market (1) Total returns are historical and are calculated by determining the percentage change in net asset value with all distributions reinvested. Past performance is no guarantee of future results. Investment return and principal value will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. The Portfolio's total return for the period reflects the total return of another fund that invests in the Portfolio, adjusted for non-Portfolio expenses of that fund. Performance is for the stated time period only and is not annualized; due to market volatility, the Fund's current performance may be lower or higher. The performance of the Fund and the Portfolio is compared to that of their benchmark, the S&P 500 Index. It is not possible to invest directly in an Index. 15 performance. Eaton Vance's primary focus in pursuing total return is on the Fund's common stock portfolio, which consists of its indirect interests in the Portfolio. In measuring the performance of the Fund's real estate investments, Eaton Vance considers whether, through current returns and changes in valuation, the real estate investments achieve returns that over the long-term exceed the cost of the borrowings incurred to acquire such investments and thereby add to Fund returns. The Fund has entered into interest rate swap agreements to fix a substantial portion of the borrowing costs under the Credit Facility used to acquire equity in its real estate investments and to mitigate in part the impact of interest rate changes on the Fund's net asset value. The Fund's total return was -1.71% for the quarter ended March 31, 2005. This return reflects a decrease in the Fund's net asset value per share from $126.88 to $122.30 and a distribution of $2.38 per share during the period. The total return of the S&P 500 Index was -2.15% over the same period. The performance of the Fund exceeded that of the Portfolio by approximately 0.27% during the period. Last year, the Fund had a total return performance of 1.60% for the quarter ended March 31, 2004. This return reflected an increase in the Fund's net asset value per share from $119.60 to $120.22 and a distribution of $1.28 per share during the period. The S&P 500 Index had a total return of 1.69% over the same period. The performance of the Fund trailed that of the Portfolio by approximately 0.52% during that period. PERFORMANCE OF THE PORTFOLIO. For the quarter ended March 31, 2005, the Portfolio had a total return of -1.98%, compared to a total return of 2.12% during the quarter ended March 31, 2004. The total return of the Portfolio exceeded the total return of the S&P 500 Index by 0.17% in the first quarter of 2005 and 0.43% in the first quarter of 2004. Although most U.S. public companies have continued to demonstrate solid profitability and earnings growth, market performance in the first quarter was hampered by rising interest rates and growing inflation fears amid resurging oil prices. As expected, the Federal Reserve raised the federal funds target rate to 2.75%, the seventh increase in this short-term interest rate benchmark since June of last year. During the quarter, investors favored defensive, higher-yielding stocks over cyclicals, technology stocks and other high volatility stocks. The tech-heavy NASDAQ Composite Index lost over 8% during the quarter. Utilities and energy were the best performing sectors of the S&P 500 Index, while telecommunications and technology were the poorest performing sectors. Market leading industries in the first quarter included: oil and gas, health care providers and personal products. In contrast, information technology consulting, auto manufacturers and multi-line insurers were among the worst performing industry groups. The Portfolio's relative performance versus the S&P 500 Index was driven primarily by industry and sector exposure and stock selection. The Portfolio benefited from the continued overweighting of the energy sector, as oil and gas related investments advanced during the quarter on rising commodity prices. The Portfolio's relative performance also benefited from underweight positions in the lagging information technology and telecommunication sectors. Relative performance was adversely affected by an overweighting of the lagging industrial sector and an underweighting of the utilities sector, which was among the strongest performers in a defensive market. Favorable stock selection within the thrift bank, media and catalog retailer industries was also beneficial to the overall results. PERFORMANCE OF REAL ESTATE INVESTMENTS. The Fund's real estate investments are held through Belair Real Estate. As of March 31, 2005, real estate investments included an interest in a real estate joint venture (Real Estate Joint Venture), Elkhorn Property Trust (Elkhorn), and a portfolio of Partnership Preference Units. Elkhorn owns industrial distribution properties. On February 17, 2005, Belair Real Estate sold its interest in a second Real Estate Joint Venture, Bel Residential Properties Trust (Bel Residential), to another fund advised by Boston Management and Research (Boston Management), Belair Real Estate's manager. Belair Real Estate recognized a gain of approximately $2.3 million on the sale. As of March 31, 2005, the estimated fair value of the Fund's real estate investments represented 23.9% of the Fund's total assets on a consolidated basis. After adjusting for the minority interest in the Real Estate Joint Venture, the Fund's real estate investments represented 32.5% of the Fund's net assets as of March 31, 2005. During the quarter ended March 31, 2005, rental income from real estate operations was approximately $6.6 million compared to approximately $5.5 million for the quarter ended March 31, 2004, an increase of $1.1 million or 20%. This increase in rental income was due to Belair Real Estate's ownership of interests in two Real Estate Joint Ventures for much of the quarter ended March 31, 2005 compared to an ownership interest in only one Real Estate Joint Venture during the quarter ended March 31, 2004. During the quarter ended March 31, 2004, rental income decreased due to reduced apartment rental rates and increased rent concessions at the multifamily properties owned by Bel Residential. During the quarter ended March 31, 2005, property operating expenses were approximately $2.2 million compared to approximately $2.5 million for the quarter ended March 31, 2004, a decrease of $0.3 million or 12% (property operating expenses are before certain operating expenses of Belair Real Estate of approximately $1.1 million for the quarter ended March 31, 2005 and $0.8 million for the quarter ended March 31, 2004). The decrease in property operating expenses was principally due to Belair Real Estate's sale of its 16 interests in Bel Residential during the quarter ended March 31, 2005 offset in part by the operating expenses of properties owned by Elkhorn. Property operating expenses for the quarter ended March 31, 2004 were substantially unchanged from the quarter ended March 31, 2003. For many industrial distribution properties, reduced rent levels are likely to continue over the near term as above-market leases mature and space is re-leased at current market rates. Boston Management expects that improvements in industrial distribution property operating performance will occur over the longer term. At March 31, 2005, the estimated fair value of the real properties indirectly held through Belair Real Estate was approximately $172.1 million compared to approximately $158.7 million at March 31, 2004, a net increase of $13.4 million or 8%. The net increase in estimated real property values at March 31, 2005 as compared to March 31, 2004 resulted from Belair Real Estate's acquisition of Elkhorn in the third quarter of 2004, offset in part by its sale of Bel Residential in February 2005. The modest increase in estimated real property values at March 31, 2004 resulted from lower capitalization rates, which offset the impact on property values of lower near-term income expectations. Despite weak real estate operating conditions over the past several years, property values in the U.S. have remained stable or increased modestly as lower near-term property earning expectations have generally been offset by lower capitalization and discount rates applied in valuing the properties. Capitalization rates and discount rates, terms commonly used in the real estate industry, are the rate of return percentages applied to actual or projected income levels to estimate the value of real estate investments. During the quarter ended March 31, 2005, the Fund saw net unrealized appreciation of the estimated fair value of its other real estate investments (which includes Elkhorn) of approximately $0.2 million compared to unrealized depreciation of approximately $2.0 million during the quarter ended March 31, 2004. Net unrealized appreciation of approximately $0.2 million during the quarter ended March 31, 2005 consisted of approximately $1.6 million of unrealized appreciation in the value of the properties of Elkhorn, offset in part by the reclassification of previously recorded unrealized appreciation as realized gains in the amount of $1.4 million of Belair Real Estate's interest in Bel Residential during the quarter. During the quarter ended March 31, 2005, Belair Real Estate sold certain of its Partnership Preference Units totaling approximately $0.4 million (representing sales to other investment funds advised by Boston Management), recognizing a net loss of approximately $4,000 on the transactions. During the quarter ended March 31, 2005, Belair Real Estate also acquired interests in additional Partnership Preference Units (representing acquisitions from other investment funds advised by Boston Management) for a total of approximately $115.8 million. At March 31, 2005, the estimated fair value of Belair Real Estate's Partnership Preference Units totaled approximately $319.9 million compared to approximately $311.4 million at March 31, 2004, a net increase of $8.5 million or 3%. The net increase in value was principally due to more Partnership Preference Units held at March 31, 2005 compared to March 31, 2004. The decrease in value at March 31, 2004 as compared to March 31, 2003 was principally due to fewer Partnership Preference Units held. The decrease also reflected the lower per unit values of Partnership Preference Units held at March 31, 2004 due to their lower average coupon rates. In the current low interest rate environment, issuers have been redeeming Partnership Preference Units as Belair Real Estate's call protections expire or restructuring the terms of outstanding Partnership Preference Units in advance of their call dates. As a result, many of the higher-yielding Partnership Preference Units held by Belair Real Estate on March 31, 2004 were no longer held at March 31, 2005. During the quarter ended March 31, 2005, the Fund saw net unrealized appreciation of the estimated fair value of its Partnership Preference Units of approximately $0.6 million compared to net unrealized depreciation of approximately $7.0 million during the quarter ended March 31, 2004. The net unrealized appreciation of approximately $0.6 million during the quarter ended March 31, 2005 occurred as a result of increases in the per unit values of Partnership Preference Units held by Belair Real Estate at March 31, 2005. The net unrealized depreciation in the first quarter of 2004 of $7.0 million consisted of approximately $3.3 million of unrealized depreciation resulting from decreases in per unit values of the Partnership Preference Units held by Belair Real Estate at March 31, 2004 and approximately $3.7 million of unrealized depreciation resulting from the reclassification of previously recorded unrealized appreciation as realized gains due to sales of Partnership Preference Units during the quarter ended March 31, 2004. Distributions from Partnership Preference Units for the quarter ended March 31, 2005 totaled approximately $5.3 million compared to approximately $8.5 million for the quarter ended March 31, 2004, a decrease of $3.2 million or 38%. The decrease was principally due to fewer Partnership Preference Units held on average during the quarter as well as to lower average distribution rates. Distributions from Partnership Preference Units for the quarter ended March 31, 17 2004 compared to March 31, 2003 decreased due to fewer Partnership Preference Units held on average, as well as to lower average distribution rates for the Partnership Preference Units held during the quarter ended March 31, 2004. PERFORMANCE OF INTEREST RATE SWAP AGREEMENTS. For the quarter ended March 31, 2005, net realized and unrealized gains on the Fund's interest rate swap agreements totaled approximately $3.1 million, compared to net realized and unrealized losses of approximately $7.9 million for the quarter ended March 31, 2004. Net realized and unrealized gains on swap agreements in 2005 consisted of $4.9 million of net unrealized gains due to changes in swap agreement valuations, offset by $1.8 million of periodic payments made pursuant to outstanding swap agreements (and classified as net realized losses on interest rate swap agreements). For the quarter ended March 31, 2004, the Fund had net unrealized losses of $4.9 million due to swap agreement valuation changes and $3.0 million of swap agreement periodic payments. The positive impact on Fund performance for the quarter ended March 31, 2005 from changes in swap agreement valuations was attributable to an increase in swap rates during the period. The negative impact on Fund performance for the quarter ended March 31, 2004 from changes in swap valuations was due primarily due to a decline in swap rates during the period. (b) LIQUIDITY AND CAPITAL RESOURCES. OUTSTANDING BORROWINGS. The Fund has entered into credit arrangements with DrKW Holdings, Inc. and Merrill Lynch Mortgage Capital, Inc. (collectively, the Credit Facility) primarily to finance the Fund's real estate investments and will continue to use the Credit Facility for such purpose in the future. The Credit Facility may also be used for other purposes, including any liquidity needs of the Fund. In the future, the Fund may increase the size of the Credit Facility (subject to lender consent) and the amount of outstanding borrowings thereunder. As of March 31, 2005, the Fund had outstanding borrowings of $494.0 million and $56.0 million of unused loan commitments under the Credit Facility. During the quarter ended March 31, 2005, the Fund amended its loan agreement with DrKW Holdings, Inc. to establish a borrowing limit of $450 million under that agreement. The Fund has entered into interest rate swap agreements with respect to a substantial portion of its real estate investments and associated borrowings. Pursuant to these agreements, the Fund makes periodic payments to the counterparty at predetermined fixed rates in exchange for floating-rate payments that fluctuate with one-month LIBOR. During the terms of the outstanding interest rate swap agreements, changes in the underlying values of the agreements are recorded as unrealized appreciation or depreciation. As of March 31, 2005, the unrealized appreciation related to the interest rate swap agreements was approximately $7.2 million. As of March 31, 2004, the unrealized depreciation related to the interest rate swap agreements was approximately $3.2 million. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. INTEREST RATE RISK. The Fund's primary exposure to interest rate risk arises from its real estate investments that are financed by the Fund with floating rate borrowings under the Credit Facility and by fixed-rate secured mortgage debt obligations of the Real Estate Joint Ventures. Partnership Preference Units are fixed rate instruments whose values will generally decrease when interest rates rise and increase when interest rates fall. The interest rates on borrowings under the Credit Facility are reset at regular intervals based on one-month LIBOR. The Fund has entered into interest rate swap agreements to fix the cost of a substantial portion of its borrowings under the Credit Facility used to acquire equity in real estate investments and to mitigate in part the impact of interest rate changes on the Fund's net asset value. Under the terms of the interest rate swap agreements, the Fund makes cash payments at fixed rates in exchange for floating rate payments that fluctuate with one-month LIBOR. The Fund's interest rate swap agreements will generally increase in value when interest rates rise and decrease in value when interest rates fall. In the future, the Fund may use other interest rate hedging arrangements (such as caps, floors and collars) to fix or limit borrowing costs. The use of interest rate hedging arrangements is a specialized activity that can expose the Fund to significant loss. The following table summarizes the contractual maturities and weighted-average interest rates associated with the Fund's significant non-trading financial instruments. The Fund has no market risk sensitive instruments held for trading purposes. This information should be read in conjunction with Note 4 and Note 5 to the Fund's unaudited condensed consolidated financial statements in Item 1 above. 18
Interest Rate Sensitivity Cost, Principal (Notional) Amount by Contractual Maturity and Callable Date for the Twelve Months Ended March 31,* Estimated Fair Value as of 2006 2007 2008 2009 2010 Thereafter Total March 31, 2005 - ------------------------------------------------------------------------------------------------------------------------------------ Rate sensitive liabilities: - ------------------------ Long-term debt: - ------------------------ Fixed-rate mortgages $135,000,000 $135,000,000 $136,700,000 Average interest rate 5.67% 5.67% - ------------------------ Variable-rate Credit Facility $494,000,000 $494,000,000 $494,000,000 Average interest rate 3.18% 3.18% - ------------------------------------------------------------------------------------------------------------------------------------ Rate sensitive derivative financial instruments: - ------------------------ Pay fixed/receive variable interest rate swap agreements $378,782,000 $378,782,000 $ 7,223,690 Average pay rate 4.73% 4.73% Average receive rate 3.17% 3.17% - ------------------------------------------------------------------------------------------------------------------------------------ Rate sensitive investments: - ------------------------ Fixed-rate Partnership Preference Units: - ------------------------ Camden Operating, L.P., 7% Series B Cumulative Redeemable Perpetual Preferred Units, Callable 12/2/08, Current Yield: 7.01% $ 4,161,360 $ 4,161,360 $ 3,995,200 Colonial Realty Limited Partnership, 7.25% Series B Cumulative Redeemable Perpetual Preferred Units, Callable 8/24/09, Current Yield: 7.17% $35,205,087 $ 35,205,087 $ 37,436,600 Essex Portfolio, L.P., 7.875% Series D Cumulative Redeemable Preferred Units, Callable 7/28/10, Current Yield: 7.72% $ 28,232,050 $ 28,232,050 $ 28,064,630 19 Estimated Fair Value as of 2006 2007 2008 2009 2010 Thereafter Total March 31, 2005 - ------------------------------------------------------------------------------------------------------------------------------------ Kilroy Realty, L.P., 7.45% Series A Cumulative Redeemable Preferred Units, Callable 9/30/09, Current Yield: 7.80% $43,574,145 $ 43,574,145 $ 42,524,556 Liberty Property L.P., 7.45% Series B Cumulative Redeemable Preferred Units, Callable 8/31/09, Current Yield: 7.16% $38,002,560 $ 38,002,560 $ 39,260,000 MHC Operating Limited Partnership, 8.0625% Series D Cumulative Redeemable Perpetual Preference Units, Callable 3/24/10, Current Yield: 7.89% $50,000,000 $ 50,000,000 $ 51,120,000 National Golf Operating Partnership, L.P., 11% Series A Cumulative Redeemable Preferred Units, Callable 2/6/03, Current Yield: 10.91% $31,454,184 $ 31,454,184 $ 33,299,889 National Golf Operating Partnership, L.P., 11% Series B Cumulative Redeemable Preferred Units, Callable 2/6/03, Current Yield: 10.91% $ 5,000,000 $ 5,000,000 $ 5,042,000 PSA Institutional Partners, L.P., 6.40% Series NN Cumulative Redeemable Perpetual Preferred Units, Callable 3/17/10, Current Yield: 6.64% $37,541,670 $ 37,541,670 $ 36,165,000 Regency Centers, L.P., 7.45% Series D Cumulative Redeemable Preferred Units, Callable 9/29/09, Current Yield: 7.14% $19,310,868 $ 19,310,868 $ 18,788,400 Vornado Realty, L.P., 7% Series D-10 Cumulative Redeemable Preferred Units, Callable 11/17/08, Current Yield: $23,491,580 $ 23,491,580 $ 24,196,996 6.94%(1) - ------------------------ Note Receivable: - ------------------------ 20 Estimated Fair Value as of 2006 2007 2008 2009 2010 Thereafter Total March 31, 2005 - ------------------------------------------------------------------------------------------------------------------------------------ Fixed-rate note receivable, 8% $ 2,070,580 $ 2,070,580 $ 2,443,396
* The amounts listed reflect the Fund's positions as of March 31, 2005. The Fund's current positions may differ. (1) Belair Real Estate's interest in these Partnership Preference Units is held in whole or in part through Bel Holdings LLC. ITEM 4. CONTROLS AND PROCEDURES. Eaton Vance, as the Fund's manager, evaluated the effectiveness of the Fund's disclosure controls and procedures (as defined by Rule 13a-15(e) of the 1934 Act) as of the end of the period covered by this report, with the participation of the Fund's Chief Executive Officer and Chief Financial Officer. The Fund's disclosure controls and procedures are the controls and other procedures that the Fund designed to ensure that it records, processes, summarizes and reports in a timely manner the information that the Fund must disclose in reports that it files or submits to the Securities and Exchange Commission. Based on that evaluation, the Fund's Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2005, the Fund's disclosure controls and procedures were effective. During the quarter, the Fund adopted additional internal controls relating to its real estate investments, including the establishment of a valuation committee to oversee the implementation of the valuation policies relating to the Fund's real estate and other investments. There were no other changes in the Fund's internal control over financial reporting that occurred during the quarter ended March 31, 2005 that have materially affected or are reasonably likely to materially affect, the Fund's internal control over financial reporting. As the Fund's manager, the complete and entire management, control and operation of the Fund are vested in Eaton Vance. The Fund's Chief Executive Officer and Chief Financial Officer intend to report to the Board of Directors of Eaton Vance, Inc. (the sole trustee of Eaton Vance) any significant deficiency in the design or operation of internal control over financial reporting which could adversely affect the Fund's ability to record, process, summarize and report financial data, and any fraud, whether or not material, that involves management or other employees who have a significant role in the Fund's internal control over financial reporting. Effective April 15, 2005, Eaton Vance appointed James L. O'Connor interim Chief Financial Officer to serve during Michelle A. Green's maternity leave, which is expected to continue for three to four months. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. Although in the ordinary course of business, the Fund and its directly and indirectly controlled subsidiaries may become involved in legal proceedings, the Fund is not aware of any material pending legal proceedings to which any of them is subject. ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. As described in the Fund's Annual Report on Form 10-K for the year ended December 31, 2004, shares of the Fund may be redeemed by Fund shareholders on any business day. Redemptions are met at the net asset value per share of the Fund. 21 The right to redeem is available to all shareholders and all outstanding Fund shares are eligible. During each month in the quarter ended March 31, 2005, the total number of shares redeemed and the average price paid per share were as follows: Total No. of Shares Average Price Paid Month Ended Redeemed(1) Per Share - ----------------------------------------------------------------------- January 31, 2005 46,390.421 $122.31 - ----------------------------------------------------------------------- February 28, 2005 247,777.239 $123.77 - ----------------------------------------------------------------------- March 31, 2005 120,781.840 $125.54 - ----------------------------------------------------------------------- Total 414,949.500 $124.55 - ----------------------------------------------------------------------- (1) All shares redeemed during the periods were redeemed at the option of shareholders pursuant to the Fund's redemption policy. The Fund has not announced any plans or programs to repurchase shares other than at the option of shareholders. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. No matters were submitted to a vote of security holders during the three months ended March 31, 2005. ITEM 5. OTHER INFORMATION. None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K: (a) The following is a list of all exhibits filed as part of this Form 10-Q: 4.1(b) Amendment No. 2 dated February 17, 2005 to the Loan and Security Agreement between Belair Capital Fund LLC and DrKW Holdings, Inc. 31.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (b) Reports on Form 8-K: None. 22 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned duly authorized officer on May 10, 2005. BELAIR CAPITAL FUND LLC /s/ James L. O'Connor --------------------- James L. O'Connor Chief Financial Officer (Duly Authorized Officer and Principal Financial Officer) 23 EXHIBIT INDEX ------------- 4.1(b) Amendment No. 2 dated February 17, 2005 to the Loan and Security Agreement between Belair Capital Fund LLC and DrKW Holdings, Inc. 31.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 24 EX-99.(4.1(B) 2 belairex41b.txt BELAIR EXHIBIT 4.1(B) EXHIBIT 4.1(b) AMENDMENT NO. 2 dated as of February 17, 2005 (this "Amendment") to the LOAN AND SECURITY AGREEMENT dated as of July 15, 2003, as amended by Amendment No. 1 dated as of March 16, 2004 (as the same may be amended, supplemented or otherwise modified, renewed or replaced from time to time, the "Credit Agreement"), by and between BELAIR CAPITAL FUND LLC, a Massachusetts limited liability company (the "Borrower") and DRKW HOLDINGS, INC., a Delaware corporation, as lender (the "Lender"). WHEREAS, on July 15, 2003, the Borrower and the Lender entered into the Credit Agreement pursuant to which the Lender made available to the Borrower a term loan in the aggregate principal amount of $515,000,000; WHEREAS, on March 16, 2004, the Borrower and the Lender entered into Amendment No. 1 to the Credit Agreement pursuant to which the Lender increased the amount of the term loan by $21,000,000, so that, after giving effect to all prior prepayments in an aggregate principal amount of $68,000,000, an aggregate principal amount of $468,000,000 was outstanding under the term loan; WHEREAS, subsequent to March 16, 2004 the Borrower has additionally repaid to the Lender an aggregate of $63,000,000 of the outstanding principal amount of the term loan, so that, after giving effect to such prepayment, the aggregate principal amount of $405,000,000 was outstanding under the term loan; WHEREAS, the Borrower has requested the Lender to further increase the amount of the term loan by $45,000,000, so that, as of the date hereof after giving effect to this Amendment and all prior prepayments, the aggregate principal amount of $450,000,000 will be outstanding under the term loan; WHEREAS, the Borrower has requested and the Lender has agreed, subject to the terms and conditions of this Amendment, to amend certain provisions of the Credit Agreement, as set forth herein; NOW, THEREFORE, in consideration of the premises and of the mutual agreements herein contained, the parties hereto agree as follows: SECTION 1. AMENDMENTS. Subject to the satisfaction of the conditions precedent set forth in Section 3 hereof, the Credit Agreement is hereby amended as of the Effective Date (as defined in Section 3 hereof) as follows: (A) Section 2.1 of the Credit Agreement is hereby amended in its entirety to read as follows: "2.1 Loan. The Lender agrees, on the terms and conditions set forth herein, (i) to make (w) a Loan to the Borrower on the Closing Date in an aggregate principal amount of $515,000,000, (x) a Loan to the Borrower on March 16, 2004 in an aggregate principal amount of $21,000,000 and (y) a Loan to the Borrower on February 17, 2005 in an aggregate principal amount of $45,000,000 and (ii) concurrently with any prepayment made by a Designated Fund under a loan facility provided by the Lender to such Designated Fund in connection with a transfer of assets from such Designated Fund to the Borrower, to make an additional Loan to the Borrower in an aggregate principal amount equal to the amount of such prepayment." (B) Section 2.2(b) of the Credit Agreement is hereby amended by deleting the figure "$468,000,000" and inserting the figure "$450,000,000" in lieu thereof. (C) Section 2.4 of the Credit Agreement is hereby amended in its entirety to read as follows: "2.4 Interest. Interest shall accrue on the unpaid principal amount of the Loan at the Interest Rate from and including the Closing Date (with respect to the loan made pursuant to Section 2.1(i)(w) hereof), March 16, 2004 (with respect to the loan made pursuant to Section 2.1(i)(x) hereof), February 17, 2005 (with respect to the loan made pursuant to Section 2.1(i)(y) hereof) or the date that a Loan is made pursuant to Section 2.1(ii) (with respect to such loan made pursuant to Section 2.1(ii)), and in each case, to but excluding the date of any principal payment whether upon acceleration or otherwise. Interest accrued on the Loan shall be payable on each applicable Interest Payment Date and on any day on which the Loan is repaid whether due to acceleration or otherwise. Notwithstanding anything in this Agreement to the contrary, the interest rate on the Loan shall in no event be in excess of the maximum interest rate permitted by Applicable Law. All interest shall accrue daily and shall be calculated on the basis of a 360-day year and the actual number of days elapsed." SECTION 2. REPRESENTATIONS AND WARRANTIES. The Borrower hereby represents and warrants that: (A) after giving effect to this Amendment, the representations and warranties contained in the Credit Agreement are true and correct in all material respects on and as of the date hereof as if such representations and warranties had been made on and as of the date hereof (except to the extent that any such representations and warranties specifically relate to an earlier date); and (B) after giving effect to this Amendment, no Event of Default or Default will have occurred and be continuing on and as of the date hereof. SECTION 3. CONDITIONS PRECEDENT. The effectiveness of this Amendment is subject to the satisfaction in full of each of the conditions precedent set forth in this Section 3 (the date on which all such conditions have been satisfied being herein called the "Effective Date"): (A) the Lender shall have received executed counterparts of this Amendment which, when taken together, bear the signatures of the Borrower and the Lender; (B) the Lender shall have received a new Note (the "Replacement Note") duly executed on behalf of the Borrower in an aggregate principal amount of $450,000,000 to be exchanged for and replace the prior Note (the "Original Note") delivered by the Borrower in an aggregate principal amount of $468,000,000; (C) the Borrower shall have received from the Lender the Original Note for cancellation; (D) the Lender shall have received the written opinion of counsel to the Borrower, dated the date hereof and addressed to the Lender, in form and substance satisfactory to counsel to the Lender; (E) the Lender shall have received such other documents as the Lender may reasonably request; and (F) all legal matters incident to this Amendment shall be satisfactory to counsel to the Lender. SECTION 4. LOAN. Upon satisfaction of the conditions precedent set forth in Section 3 hereof, the Lender shall make $45,000,000 available to the Borrower on February 17, 2005 by causing an amount of same day funds in Dollars equal to $45,000,000 to be disbursed via Federal Funds wire transfer to the Borrower's account at the Custodian, ABA No. 011-001-438, Account No. 5821-5013 Control Wire Re: Belair Capital Fund LLC - 4922, or to such other account as to which the Borrower shall instruct the Lender in writing. SECTION 5. MISCELLANEOUS. (A) Capitalized terms used herein and not otherwise defined herein shall have the meanings as defined in the Credit Agreement. (B) Except as expressly amended hereby, the Credit Agreement shall remain in full force and effect in accordance with the original terms thereof. (C) The amendments herein contained are limited specifically to the matters set forth above and do not constitute directly or by implication an amendment or waiver of any other provision of the Credit Agreement or any default which may occur or may have occurred under the Credit Agreement. (D) This Amendment may be executed in any number of counterparts, each of which shall constitute an original, but all of which when taken together shall constitute one and the same instrument. (E) This Amendment shall constitute a Fundamental Document. (F) This Amendment shall be governed by, and construed in accordance with, the laws of the State of New York. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, the undersigned have caused this Amendment to be duly executed as of the date first written above. Borrower: BELAIR CAPITAL FUND LLC, as Borrower By: EATON VANCE MANAGEMENT, as Manager By: /s/ M. Katherine Kreider --------------------------- Name: M. Katherine Kreider Title: Vice President Address: The Eaton Vance Building 255 State Street Boston, Massachusetts 02109 Telephone No.: (617) 482-8260 Telecopier No.: (617) 482 3836 Lender: DRKW HOLDINGS, INC., as Lender By: /s/ Neil D. Winward ----------------------- Name: Neil D. Winward Title: President Address: 1301 Avenue of the Americas New York, New York 10019 Telephone No.: (212) 969-7909 Telecopier No.: (212) 969-7850 ACKNOWLEDGED AND ACCEPTED Investment Manager: WELLS FARGO BANK, NATIONAL ASSOCIATION, successor-by-merger to Wells Fargo Bank Minnesota, National Association, as Investment Manager By: /s/ John Kinzel ------------------------ Name: John Kinzel Title: Corporate Trust Officer Address: Sixth Street and Marquette Avenue MAC N9311-161 Minneapolis, MN 55479 Attention: Corporate Trust Services/Asset-Backed Administration Telephone No.: (612) 667-8058 Telecopier No.: (617) 667-3539 EX-99.(31.1) 3 belairex311.txt BELAIR CEO CERTIFICATION PURSUANT TO SECTION 302 EXHIBIT 31.1 CERTIFICATIONS PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 CERTIFICATION - ------------- I, Thomas E. Faust Jr., certify that: 1. I have reviewed this Form 10-Q of Belair Capital Fund LLC; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: May 10, 2005 /s/ Thomas E. Faust Jr. ----------------------- Thomas E. Faust Jr. Chief Executive Officer EX-99.(31.2) 4 belairex312.txt BELAIR CFO CERTIFICATION PURSUANT TO SECTION 302 EXHIBIT 31.2 CERTIFICATIONS PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 CERTIFICATION - ------------- I, James L. O'Connor, certify that: 1. I have reviewed this Form 10-Q of Belair Capital Fund LLC; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: May 10, 2005 /s/ James L. O'Connor --------------------- James L. O'Connor Chief Financial Officer EX-99.(32.1) 5 belairex321.txt BELAIR CEO CERTIFICATION PURSUANT TO SECTION 906 EXHIBIT 32.1 CERTIFICATIONS PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 The undersigned hereby certifies in his capacity as Chief Executive Officer of Belair Capital Fund LLC (the Fund), that based on his knowledge: (a) the Quarterly Report of the Fund on Form 10-Q for the quarter ended March 31, 2005 (the Report) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended; and (b) the information contained in the Report fairly presents, in all material respects, the financial condition and the results of operations of the Fund for such period. Date: May 10, 2005 /s/ Thomas E. Faust Jr. ----------------------- Thomas E. Faust Jr. Chief Executive Officer A signed original of this written statement required by Section 906 has been provided to the Fund and will be retained by the Fund and furnished to the Securities and Exchange Commission or its staff upon request. EX-99.(32.2) 6 belairex322.txt BELAIR CFO CERTIFICATION PURSUANT TO SECTION 906 EXHIBIT 32.2 CERTIFICATIONS PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 The undersigned hereby certifies in his capacity as Chief Financial Officer of Belair Capital Fund LLC (the Fund), that based on his knowledgde: (a) the Quarterly Report of the Fund on Form 10-Q for the quarter ended March 31, 2005 (the Report) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended; and (b) the information contained in the Report fairly presents, in all material respects, the financial condition and the results of operations of the Fund for such period. Date: May 10, 2005 /s/ James L. O'Connor --------------------- James L. O'Connor Chief Financial Officer A signed original of this written statement required by Section 906 has been provided to the Fund and will be retained by the Fund and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----